The Effect of Liquidity, Efficiency, and Overhead on Bank Profitability

Abstract

The bank's top management's efforts to manage the bank operations increase sustainable profitability. This study examines the effect of liquidity, efficiency, and bank overhead on the profitability of banks in Indonesia that implement digital banking. Bank profitability has an essential role as a measure of the success of bank operations in balancing Asset Liability Management efficiently. This paper examines the determinants of the bank's profitability in Indonesia. The research sample is the six banks in Indonesia that implemented digital banking from 2007 to 2019. The data analysis used multiple regression analysis. The results showed that liquidity, efficiency, and bank overhead significantly influenced banks' profitability in Indonesia simultaneously. The effect obtained partially is that liquidity has a significant impact on increasing research profitability. In addition, bank efficiency carried out by management can have a positive impact on profitability. Finally, bank overhead can increase the profitability of bank in Indonesia. This research contributes to the theory of corporate financial management and provides insight for bank managers in increasing profitability on an ongoing basis.